Frank Dobson: cash "can't be spent twice"

And Alistair Darling, Social Security Secretary, said two weeks ago that the government would introduce "transitional measures to help all pensioners" ahead of the introduction of a scheme aimed at helping elderly people with few or no savings.

Frank Dobson, the former health secretary, on Sunday restated a government line linking a rise in pensions payments to a refusal to bow to demands by farmers and hauliers for a drop in fuel taxes.

Treasury funds "can't be spent twice", Mr Dobson told GMTV's The Sunday Programme.

"If people want very substantial improvements in living standards for pensioners, they can't improve the living standards of some of these millionaire people who run some of these lorries."

Last minute talks

Mr Brown is on Tuesday to hold talks with campaigners for the elderly to discuss pensioners' incomes, which has become an increasingly important political issue.

More than two thirds of Britons over the age of 54 - accounting for one fifth of the population - are dissatisfied with the government's performance, a Mori poll in September showed.

Other reforms set to be included in Wednesday's pre-Budget report include measures to help smaller companies with VAT payments, the Sunday Times says.

Small and medium sized firms will be able to pay VAT at a flat rate, instead of on an item-by-item basis.

More companies will also be able to pay VAT annually rather than quarterly, so easing cash flow restraints.

Capital gains tax reviewed

Mr Brown last month revealed that reforms to capital gains and small business taxes would be include in the pre-Budget report.

He has also hinted at measures to encourage firms to invest in "the potential of our people", including skills training.

And the report is set to cover his views on the minimum funding requirement which, while designed to guarantee payments for recipients of company-backed pensions, has been attacked for being too restrictive.